Connecticut regulators court potential buyers for PHL Variable blocks

One year after a Connecticut judge placed PHL Variable Insurance Co. into rehabilitation, the insurer is the subject of a controlled auction.

Thirteen companies are studying confidential financial information as Connecticut regulators pursue the sale or reinsurance of PHL, or its blocks of business.

“It is expected that several of PHL’s lines of business will draw interest from buyers,” reads a new status report from Connecticut Insurance Commissioner Andrew Mais. “These are most likely to include the fixed indexed annuity block, the variable life and annuity business and certain term and whole life business.”

The troubled PHL and its subsidiaries, Concord Re, Inc., and Palisado Re, Inc., were put in Mais’s control after a May 20, 2024 court order. Rehabilitators released a second “Accounting and Status Report” Tuesday.

The update is full of news on how regulators are managing to keep PHL afloat until the companies are sold or rehabilitated. Mais had promised a full rehabilitation plan by “mid-2025.” That plan will not arrive until the fourth quarter of this year, the status report said.

But the sales drive is the biggest news. The 13 companies signed non-disclosure agreements and have access to a “virtual data room” with an actuarial appraisal report, a summary of existing reinsurance arrangements, and details regarding the companies’ arrangements with third-party administrative and investment providers.

Another dozen companies are in discussions with Connecticut counsel to resolve concerns about the NDA, Mais said in the report.

The commissioner, “continues to believe that a sale of some or all of PHL’s lines of business will provide the best outcome for policyholders,” Mais said in the report. “The sales process has launched, but it is still at a relatively early stage. The Rehabilitator expects to have expressions of interest from potential buyers in the third quarter of 2025.”

PHL issued life insurance and annuity products and related supplemental contracts to policyholders nationwide. Concord and Palisado are captive insurers whose only business is the reinsurance of PHL’s liabilities.

PHL finances stable

The PHL companies’ capital and surplus remained stable at negative $2.2 billion when compared to the end of the third quarter 2024, status report said, citing a year-end audit.

A thorough financial analysis determined that approximately 70% of PHL’s invested assets are in “higher quality assets with predictable and stable cash flows,” the status report said.

“These assets are highly suitable to support PHL’s liabilities and are expected to be relatively easily convertible to cash, if necessary, to fund liabilities and/or redeploy into a PHL business buyer’s preferred strategic asset allocation,” the status report concluded, adding that these assets will be held for the foreseeable future.

The remaining 30% of invested assets consist of “rated debt with scheduled cash flows but more complex and structured asset classes” (19%) and alternative assets and collateralized loan obligations (11%).

Regulators continue to explore the sale of these assets where value can be obtained, the status report noted. All new cash flow is being invested solely in cash and cash equivalents.

At the end of the third quarter 2024, the PHL companies held $233 million in cash and short-term investments. As of March 31, 2025, that figure dropped to $191 million, the status report said.

The change reflects “continued positive cash flow offset by purchases of high-quality, short-duration bonds to increase return.”

Troubles with the UL block

While PHL has attractive blocks, the insurer’s universal life business is not among them, regulators say.

“The non-variable universal life insurance block continues to present significant challenges,” Mais writes in the status report. “The UL block is not expected to generate interest from buyers absent material policy restructuring. The Rehabilitator believes, however, that a plan will deliver at least as much value, and likely more, to the UL policies as would be received in liquidation.”

About 60% of UL policies have death benefits of $300,000 or less, which is the limit of coverage provided by the majority of state guaranty associations, the status report notes. Mais stressed that he does not expect that guaranty associations will be triggered in connection with the UL block.

As part of his rehabilitation effort, Mais introduced the moratorium on benefits payments until a Connecticut court approves a final plan. Several policyholders filed objections to the moratorium.

As of May 15, 2025, Mais reported 308 applications submitted under a hardship program, with 139 of those requiring further information. Seventy-seven were resolved, 55 are awaiting supplemental documentation from the applicant, and seven are under review by the hardship committee.

Mais has authorized 191 payments under the program totaling about $5.44 million, the status report said. There have been 17 denials, mostly for technical reasons or unallowable benefits.

PHL companies reported net death claims of about $263 million for 2024. Average net death claims in all four quarters were lower than the average net death claims experienced in 2023, the status report said.

Since entering rehabilitation, the PHL companies experienced “an elevated number of policy lapses beginning in the third quarter of 2024,” the status report said. Lapses primarily occurred within the UL and term products.

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